IF that Liberal campaign ad – “Labor’s debt is growing by $100 million a day” – achieves its aim of scaring you, notify your doctor now.
Because we’re about to reveal what the number would be were we in as deep a ditch as most of the rest of the world.
Yesterday we lambasted Labor for overstating its money-management credentials. We revealed repeated instances of ministers claiming we’re leading the developed world on measures like fiscal soundness and unemployment, when we’re not.
But the Coalition is being just as economical with the truth. Many have wondered where the Libs’ figure of $100 million comes from.
According to Joe Hockey’s office and Liberal Campaign HQ, it is derived from dividing the forecast deficit this financial year – $40.7 billion – by the 365 days in a year. They then used a “rounded average” of 100 big ones. If only repaying the debt was so simple.
Tony Abbott’s debt ad pretends it’s as if the Global Financial Crisis never happened. Three-quarters of that $100 million a day is a GFC-induced dive in tax revenue – something Messrs Abbott and Hockey would have been unable to stop had they been at the helm.
The other quarter is mainly stimulus spending.
The haste with which it was put together led to deadly consequences. But by acting quickly Treasury estimates 200,000 jobs were saved. This improves income tax receipts and reduces welfare payments, thereby limiting the level of the deficit.
Now for the figures that are even scarier than the Liberal ads.
If our budget shortfall was going to be as wide as America’s, then Australia’s debt would be growing by $300 million a day.
This is because the 2011 US budget deficit – as a proportion of GDP – is forecast to be three times the size of Australia’s at 8.3 per cent versus 2.8 per cent.
If we were in a hole as deep as the UK we’d be borrowing $360 million a day, and for Ireland it would be $415 million a day.
The reality is,Australia has among the lowest levels of debt in the developed world. Our net government debt will peak at 6 per cent of GDP.
In Europe, most countries struggle to adhere to the EU’s 60 per cent net debt cap. Japan will be above that level until 2084, according to a major report.
Importantly, Australia is likely to stop adding to its borrowing much sooner than most of the rest of the world – 2012-13, when net debt is set to peak at $94 billion.